KARACHI (May 23 2007): The already declining country's textile exports once again dipped by 14 percent during April 2007 after two months break against March 2006, due to decline in exports of the some major textile products including cotton yarn, cotton carded and bed-wear. Currently, the textile sector is undergoing difficult time, mostly due to high cost of production and increasing competitiveness in the international market, which have badly hit the country's textile exports.

Lately, the federal government announced six-percent research and development (R&D) support for sustaining the major products of the textile sector, which augmented the textile exports, bringing about the exports growth in previous months. However, in April, textile sector once again witnessed a regressive trend, resulting in a decline by $140 million. On a monthly basis, textile export stood at $847.935 million during April 2007 as compared to $987.484 million during March 2007, denoting a regression of 14.13 percent. Official statistics show textile exports also registered a decline of $0.695 million during April 2007 against April 2006.

Exporters said that the government is not paying due attention to textile exports, which contribute the largest share of 66 percent in the country's exports. Criticising, the Governor State Bank of Pakistan for her statement pertaining to textile sector, they said that the government should avoid such demoralising attitude toward the collapsing textile industry and urged that it should play an effective role to boost its growth and exports.

"When the top officials of the government are demoralising the exporters then it is very difficult to lift textile exports," they said. Statistics indicate that out of 13 textile products, export of 5 textile products including cotton yarn, towels, cotton cloth, bed-wear and cotton carded exports have recorded a decline in export during April 2007.

On the other hand, textile exports during the first ten months (July-April) of the current fiscal year witnessed a growth of 6.18 percent or $516.114 million. Country's overall textile exports stood at $8.866 billion during July-April of the current fiscal year as compared to $8.350 billion during the same period of the last fiscal year 2005-06.

Exporters pointed out that the 'high cost of production' has brought the country's textile industry into severe crisis, which have put a negative impact on its growth. They said that despite government's repeated pledges, still has not announced any textile package and exporters are relaying only on 6 percent R&D to boost exports.

Major competitors are China, India and Bangladesh, where textile products are available on lower prices, they said and added that inefficient marketing strategy on the part of exporters in the world market have also created problems for them. "If government could not announce any relief package for textile industry then its exports will continue to decline," they concluded.

KARACHI (May 23 2007): Azgard-9 has proposed to issue bonds of up to $260 million in the international capital markets in accordance with procedures typically followed for issuance of debt securities in such markets. The purpose of the bond issuance is re-profiling of debt structure at Azgard and Pak American Fertilizer Limited (PAFL) level (subsequently a merged company).

"Depending on market conditions when the bonds are taken to the market, we expect the tenure of the bonds to be between 7 to 10 years (bullet payment at the end of the tenure) at interest rates to be determined by the market conditions at the time of issuance of the bonds." The company in an information sent to the Karachi Stock Exchange said on Tuesday.

"In this respect we are in the process of filing applications for permission from the State Bank of Pakistan and other regulatory authorities such as the Securities and Exchange Commission of Pakistan for the proposed issuance of bonds", the company added.

Upon obtaining requisite permissions and authorizations, and completion of necessary documentation and fulfilling requirements for such bond offering, the bond will be taken to the market.

The bonds will be offered and sold in certain selected jurisdictions outside Pakistan only to institutional investors so that such jurisdictions the bonds will not be considered a "public offering" in accordance with the laws of such jurisdictions but a "private" placement. The bond will not be offered to investors in Pakistan .

In another information sent to the KSE, it was said that the board of directors of Azgard Nine Limited (Azgard) and Pak American Fertilizer Limited (PAFL) have decided to merge both the entities in the manner that entire undertaking of PAFL will be merged into Azgard. PAFL is 100 percent owned subsidiary of Azgard and a public unlisted company. It was also decided that Azgard would be the surviving entity. The merger will be subject to obtaining regulatory and other approvals and sanction of court of competent jurisdiction.

The board of directors noted that the said merger would have numerous benefits to the shareholders of the company including more efficient and cost effective management of businesses.

The company will evolve from a vertical textile garment company into a well-diversified multi-product conglomerate with approximately equal exposure to the fertilizer and textile sectors. The larger merged balance sheet is expected to facilitate a faster execution of the plans to expand into branding and de bottle necking of its existing fertilizer plant.

KARACHI (May 22 2007): The State Bank of Pakistan (SBP) on Monday formally announced for the 6 percent research and development (R&D) support for textile units working in the export processing zones (EPZ).

The SBP has issued a circular no./09/EPP.1 (51) R&D/ 2007 for all authorized dealers saying that the ministry of commerce has further

clarified that R&D support by 6 percent of FOB value on the export of readymade garments and knitwear from EPZ shall be eligible on shipment made after January 19, 2006. The SBP has advised the authorized dealers to bring the above amendment to the notice of all their constituents.

KARACHI (June 01 2007): Raw cotton's import has been up 57 percent to $503.743 million (Rs 30.57 billion) during the first ten months of the current fiscal year against same period of last fiscal. Importers said that this was due to because the country has missed its cotton production target.

"Monsoon rains in last August severely hit the country's cotton crop of Sanghar, Dhedadpur in the interior Sindh prevented country from achieving raw cotton production by around one million bales against the target of 14 million bales during the current fiscal," importers said.

They said that Pakistan is the fourth largest producer of cotton in the world but its textile industry's requirement could not be met that necessitated raw cotton import raising imports by 57 percent during July-April. The country's raw cotton import is up $188.771 million during the first ten months of the current fiscal.

"We have imported around 1.832 million raw cotton bales worth $503.743 million (Rs. 30.57 billion) during July-April of the current fiscal as compared to 1.527 million bales worth $314.972 million (Rs. 18.84 billion) during the same period last fiscal,' they informed.

The government has planned schemes to help raise the output of raw cotton for the next season but currently the country is facing around 2.5-3 million bales shortfall, they added. They said that cotton production growth for the last few years has been of high concern and this year despite all claims the country's production did not show any improvement.

Our local production stood at around 12.4 million bales against the consumption of 15-16 million bales, therefore, textile millers are placing huge orders of raw cotton import to fulfill their export orders, said a leading textile miller.

"We need better quality cotton, which has limited production in the country therefore quality issue also has brought cotton import to 1.8 million bales," he added. He said although imported cotton is costlier than the domestic cotton but due to better quality, millers prefer the imported cotton .

ISLAMABAD (June 02 2007): The textile industry should switch over from Presumptive Tax Regime (PTR) to normal law for payment on income tax. CBR Chairman M Abdullah Yusuf told the Senate standing committee on finance on Friday that budget proposals of textile sector had been discussed at the highest level, including Prime Minister Shaukat Aziz, and the government would take the final decision in this regard.

Elaborating the applicability of PTR, he said it was a temporary arrangement, and the textile sector should go to the original income tax regime to pay taxes on profit or loss basis.

He said that exports are totally zero-rated for textiles and there is no dispute on the issue. However, the textile sector has confused the issue of direct taxes with indirect taxes. The indirect taxes have been zero-rated, but this zero-rating has been mixed up with direct taxes.

He said that exports of goods are already zero-rated under government policy. As far as direct taxes are concerned, an exporter is obliged to pay income tax on net profit earned. It is a global practice to collect income tax on profit under normal system of taxation. Income tax on profit is not exempted anywhere in the world and would not be exempted in Pakistan , either.

Most of the raw materials (not manufactured locally) were zero-rated in previous budgets. In some cases, protection had to be given to local industry in case of certain raw materials (locally manufactured). Secondly, some raw materials have multiple usage in different sectors, which are not zero-rated. In such cases, 'input output ratio' has been worked out for payment of duty drawback to the exporters.

The CBR Chairman said that the Board had also received a proposal on withdrawal of duty on spare parts and generators. Responding to a query, he said that export of sugar to Afghanistan is not banned. However, there is 15 percent export duty on export of sugar to Afghanistan . Similarly, customs duty is applicable on import of sugar from India .

He said that there is no change in the excise duty regime on beverage concentrate. The input tax adjustment was not available to the beverage industry in the past as well as under the present circumstances. He said that the government wanted equity in taxes in various sectors of the economy.

The CBR Chairman stated that on the one hand there is talk about low tax-to-GDP ratio in the region; while on the other hand, everybody wants exemptions. This mindset has to be changed, as everybody wants exemptions.

Ifthikar Baig of Federation of Chamber of Commerce and Industry (FPCCI) said that around one million people had become jobless due to closure of 116 textile mills. This clearly reflected that the cost of doing business was increasing and exports were going down.

All raw materials and inputs (not manufactured locally) used in the manufacture of export goods should be zero-rated in true sense, he said. He demanded that all taxes (federal and provincial) be zero-rated for industry whose product is 85 percent exported in one form or another.

He also submitted a set of recommendations for the government for the revival of textile sector. Representatives of leading export associations, including All Pakistan Textile Mills Association (Aptma) were also present in the meeting.